If i claim 9 dependents on my w-2 would i get in trouble with IRS?

Question

I heard that you can claim 9 dependent on your w-2 so you wont get taxed when you get paid, but you have to pay the IRS at the end of the year, Is that illegal? and how much would i pay at the end of the year ?

Answer 1

Short answer: "no".

Long answer: You fill out a W-4 (not W-2) for your employer that lists 3 things your employer uses to determine how much to withhold from your paycheck and give to the IRS on your behalf each pay period. At the end of the year when you fill out your tax form (1040), you figure out how much you should have given to the IRS all year. If your employer withheld more than necessary, the difference is refunded to you. If they withheld less, you owe the difference.

The three things you enter on the W-4 are Single or Married, number of exemptions (not dependents), and if you want extra money withheld each pay period (most people put down $0 for this last one). Ideally, if you are the only worker in the household, you would enter Single or Married depending on which one you are, and you would enter the total number of people in your household. (e.g. You and your non-working spouce and 3 kids and one non-working relative live in your home, you would enter Married with 6 exemptions.) Ideally, if you do this, you would neither owe nor get a refund when you do your tax return at the end of the year.

Why? Essentially, your employer does a mini-tax return for you each pay period and determines from that how much to withheld. Let's say you get paid $6,000 once a month, you are married, and you selected 6 exemptions. Your employer takes the 6,000 and multiplies by 12 (months in a year) and subtracts the standard deduction for a married couple (for 2005, it was $10,000) and subtracts 6 times the exemption deduction (for 2005, it was $3,200). The net result is $6,000 x 12 - 10,000 - 3,200 x 6 = $42,800. They then figure out how much tax you would owe as a married couple earning a net of $42,800 (for agrument sake, let's say the tax is $8,400). Finally, they take that "yearly tax total" and divide by 12 (month in the year) to get how much you need to withhold each month, or $700. A similar calculation is used when you get paid twice per month, every 2 weeks, or every week, except the "12" becomes 24 or 26 or 52 respectively. Since they only look at that one pay periond and multiply the amount by 12 or 24 or 26 or 52 to get your yearly income, when you work overtime or get a bonus, the amont of tax withheld can really get large because the calculation says you will make a lot of money for the year even though it may be a one pay period phenomima.

However, most people don't simply have one source of income and no credits. Remember, the calculation your employer makes assumes you are the only one making money, that you don't have gains or losses from investments like stocks or rental income, that you don't have credits like child tax credits or earned income credits, that you don't have adjustments like contributions to your IRA, and that your Schedule A "Itemized Deductions" is less than the standard amount. Therefore, when you do your tax return, you may end up owing or getting a refund. If you have a lot of credits, you may want to have a higher number of exemptions. If you have other income, you may want to lower your exemptions. If you have a lot of deductions (mortgage interest, real estate taxes, etc.) you may want to increase your exemptions. If you want a larger refund, you may want to lower your exemptions. If you want to get a smaller refund or even owe a bit, you may want to raise your exemptions.

The IRS will only "get angry" and penalize you if you owe more than a certain amount. The calculation they use to determine if you owe a penalty and how much is too complicated for this answer, but you can search for it on www.irs.gov. Essentially, they won't penalize you unless you owe them at least $1,000, but for most people, you would have to owe even more than that. So, no, the IRS won't penalize you for selecting a certain amount of exemptions UNLESS by doing so, it causes you to owe the IRS too much money at the end of the year.

It is best to see a tax professional to determine what your exemption needs to be set to, but here are some general guidelines:

If you never have a tax liability (look for the line that says "total tax" on your tax return), and you don't expect to have one this year either (your family situation is essentially unchange from last year) you don't need to withhold anything. You should raise your exemptions until your employer does not withhold anything from your paycheck. If you get a refund every year and this year is basically the same as last year, you can increase your exemption amount to get more each paycheck and less refund.

Finally, the "exemption" amount you enter on your W-4 is NOT telling the IRS how many depends you have. This is a common misconception. It mearly tells your employer how much to withhold.

The lower your W-4 exemption, the more your employer will withhold each paycheck (you will get less money in your paycheck), and the more your refund (or the less you will owe) when you do your tax return.

Conversely:
The higher your W-4 exemption, the less your employer will withhold each paycheck (you will get more money in your paycheck), and the less your refund (or the more you will owe) when you do your tax return.

Good Luck! Sorry for the long answer.

Answer 2

Claiming 9 On W4

Answer 3

This Site Might Help You.

RE:
If i claim 9 dependents on my w-2 would i get in trouble with IRS?
I heard that you can claim 9 dependent on your w-2 so you wont get taxed when you get paid, but you have to pay the IRS at the end of the year, Is that illegal? and how much would i pay at the end of the year ?

Answer 4

You can claim as many dependents as you like during the year. However, when it comes time to file your taxes, you have to claim the correct number of dependents. As far as how much you would have to pay, that depends on how many dependents you actually have.

My ex boss actually claimed exempt during the year. He took the money he would have been paying the IRS during the year and put it into an interest bearing account in the bank. At the end of the year, he would file his taxes and pull the money out of that account. It wasn't much that he made on the interest, but it beat paying the IRS throughout the year. Come to find out, he ended up paying less on his personal income tax after he started doing that than if he would have been paying through the year.

Call any bookkeeper. They will tell you the same thing. No one professional recommends it though because most people who do that usually can't afford to pay what they owe at the end of the year.

I hope this helps.

Answer 5

Claiming Dependents On Paycheck

Answer 6

If you have enough itemized deductions so you won't owe at the end of the year, then is OK to claim more exemptions than you actually have. Or claim them, pay quarterly estimated tax so you're close to even at the end of the year.

If you owe a lot at the end of the year, you will be responsible for paying penalties, since you're supposed to pay it as you go during the year. You probably wouldn't go to jail over it, but would be out financially.

There are some exceptions to being liable for penalties on underpayment, such as the amount you pay in being equal to all of last year's tax, or at least 90% of what you owe for the year.

Answer 7

It is form W-4 where you make payroll adjustments, not W-2. And you do not specify the number of dependents on this form, only the number of allowances.

The number of allowances can be calculated to any number so long as you are careful not to underpay your taxes at the end of the year. Usually this means you have to pay at least 90% of tax due for current year or previous years tax, whichever is lower.

One of the easiest ways to calculate this is by using the IRS withholding calculator at http://www.irs.gov/individuals/article/0,,id=96196,00.html . This calculator itself will give you a sufficiently large number of allowances (I got 7 when I put in my details) even though you may not have any dependents, provided that you have been overpaying your taxes till that time.

So to make a long story short, it is not illegal as long as you have legitimate reason and do not intend to defraud IRS in any way.

Answer 8

Your dependents claim does change the amount of withholding, or money taken out of your paycheck to pay taxes. However, you will still have to make up for it at the end of the year... and if your tax bill is much higher than it should have been due to withholding, rumour has it that you are a higher target for auditing... and penalties can apply. So, thinking that you are getting more money to use now seems great, but if you take too much out, then you will pay back more than you would have had taken out in the first place.

So, its a gamble: there are millions of people in the US, and only so many IRS auditors to go around, so you may never get caught. But if you lose the gamble, can you pay the amount you owe and penalties (which could be multiple thousands of dollars)?

Answer 9

I have 8 dependents on my taxes to avoid my paycheck being so small, however I have medical bills and school expense so my taxes at the end of the year is less, sometimes i get back money sometimes i get nothing, but the money i get extra in my paycheck goes into a savings account just in case of a rainy day or tax time when it shows i owe money. But if you are going to exempt yourself from federal tax, you MUST make sure you have money to pay those taxes at the end of the year when you file your 1040..... because god helps you if you owe $3000 and you have only $100 in your checking account, you will be able to set up a payment plan but interest will accrue on it. So plan wisely!!!

Answer 10

I think you mean claim 9 on your W-4. That is fine, you would have to pay in a bunch of money at the end of the year if you do it all year. I claim single and 1 all year except for 2 months out of the year where I claim single and 8. I don't get alot of taxes taken out and at the end of the year I still don't have to pay in. Usually I still end up getting a small refund check. It works for me, I don't know how bad it would be on a married person though.

Answer 11

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